Buying a home is more than signing a deed or painting new walls. It’s the moment when a space becomes a reflection of who you are. Yet behind every beautiful facade lies a need for one quiet but powerful shield — home insurance.
Many homeowners think all policies are the same, but each type covers different threats and situations. Understanding those differences can help you pick the policy that truly fits your property and peace of mind.
This guide breaks down the home insurance types, explaining their coverage, ideal use cases, and subtle differences that make each valuable. From natural disasters to theft, from apartment living to sprawling estates, here’s what you should know before committing to a plan.
Homeowners Insurance (HO-3 Policy)
The HO-3 policy is the most common and widely used form of home insurance in the United States. Think of it as the broad umbrella covering most homes.
It includes:
- Protection for the dwelling itself (the structure, roof, and attached features)
- Coverage for personal property inside your home
- Liability coverage if someone is injured on your property
One important feature of the HO-3 is that it typically operates on an “open peril” basis for the dwelling, covering most risks except those explicitly excluded (such as earthquakes or floods). However, for personal property, it uses a “named peril” system, covering only specific events like fire, theft, or vandalism.
This policy is ideal for homeowners who own their property outright or are paying off a mortgage. It is also the most commonly required policy for obtaining a home loan.
HO-1 and HO-2 Policies: Basic and Broad Coverage
Before the popular HO-3 type became the standard, HO-1 and HO-2 policies represented earlier versions of home protection. While they still exist, they serve niche situations or homeowners on a tight budget.
HO-1 (Basic Form):
This is the stripped-down option, covering only specific perils like fire, theft, and certain types of damage. It’s rare today because it offers limited protection and excludes many events, such as water damage and natural disasters.
HO-2 (Broad Form):
This is a step up, covering additional perils like falling objects, freezing pipes, and accidental overflow from plumbing. HO-2 is often used for older homes that may not qualify for comprehensive HO-3 coverage or for homeowners looking for affordability without bare-bones risk.
While these types cost less upfront, they can leave serious gaps in protection. The savings are tempting, but one uncovered event could quickly reverse that advantage.
HO-4 Policy: Renters Insurance
Not everyone who needs coverage owns their home. Renters also face potential losses when unexpected events occur. That’s where HO-4, or renters insurance, steps in.
This policy doesn’t cover the actual structure of the building, which is typically covered by the landlord’s insurance. However, it protects personal belongings from events like fire, theft, or vandalism. It also covers liability if a guest is injured while in the rented space.
Renters insurance is typically very affordable, often costing less than a few streaming subscriptions per month. Despite its low cost, it’s invaluable for anyone renting an apartment, condo, or house.
Pro tip: When evaluating an HO-4 policy, check for replacement cost coverage rather than actual cash value, which factors in depreciation. Replacement cost coverage allows you to buy new items equivalent to what was damaged or stolen, instead of receiving a reduced payout.
HO-5 Policy: Comprehensive Protection
The HO-5 policy is a premium option for homeowners seeking the highest level of coverage. It builds on the HO-3 policy by offering “open peril” coverage for both the dwelling and personal property. This means everything is covered unless explicitly excluded.
HO-5 is ideal for homeowners with valuable items, such as artwork, high-tech gadgets, or luxury furniture. The policy often includes higher limits for personal effects like electronics, jewelry, and collectibles, which reduces the need for add-ons.
While it costs more, the peace of mind and streamlined claims process justify the price for many. Under this policy, fewer questions are asked when making a claim, as long as the damage is proven and not excluded.
HO-6 Policy: Condominium Insurance
Condominium living presents unique insurance needs. An HOA typically insures the exterior and shared spaces, but your personal property and interior features are covered under an HO-6 policy.
HO-6, often called condo insurance, covers what’s inside the unit: flooring, cabinetry, appliances, and personal belongings. It can also include liability coverage in case visitors are injured inside your condo.
An overlooked benefit of HO-6 plans is the “loss assessment” feature. Imagine a storm damages your building’s roof, and the HOA charges every resident a portion of the repair cost. This policy can pay for those collective expenses and keep your finances intact when surprises arise.
Before buying a condo insurance plan, review your HOA’s master policy. Knowing what’s already covered can help you avoid overlapping payments or unwanted gaps.
HO-7 Policy: Coverage for Mobile or Manufactured Homes
Mobile and manufactured homes have unique structures and foundations, so they need a policy tailored for their setup. The HO-7 type caters exactly to that. This policy functions much like the traditional HO-3 plan but adjusts for the differences in construction and mobility. It includes dwelling coverage for the home itself and protection for personal belongings, detached structures (like sheds or decks), and liability.
Manufactured homes are often more vulnerable to specific dangers like wind or hail damage, so HO-7 insurers pay special attention to these hazards. The premiums may vary depending on where the home is located and how often it’s moved.
An important tip for mobile homeowners: keep maintenance records. Since your home can be transported, some insurers deny coverage for damage that results from poor preparation before moving. A few documented precautions can go a long way if you ever file a claim.
HO-8 Policy: Historic or Older Homes
Some homes carry more than financial value; they hold history, craftsmanship, and sentimental attachment. But those charming elements also make them harder and more expensive to repair. HO-8 policies are designed specifically for older or historic homes that would cost far more to rebuild using original materials than their current market value suggests.
Instead of reimbursing you based on replacement cost, the insurer pays what’s known as the “actual cash value,” which considers depreciation. While that might seem like a drawback, it’s often the most practical option for homes with antique materials and unique features.
Restoring a century-old wood frame or custom ironwork is rarely straightforward. HO-8 plans account for this by offering flexibility in claims and often by helping homeowners find specialists suited to older architecture.
Flood Insurance
Many homeowners wrongly assume their standard policy protects them against flooding. In reality, most HO policies exclude this risk. Separate flood insurance is necessary for true protection.
Flood insurance covers direct physical loss caused by rising water, heavy rainfall, or storm surges. It applies to the foundation, electrical systems, plumbing, built-in appliances, and personal possessions.
Even if you don’t live in a zone officially marked as high-risk, climate shifts and extreme weather patterns mean every region faces some degree of flood possibility. A single inch of water inside your home can easily lead to thousands in damages.
Before purchasing, review your area’s flood maps and remember that new policies often have a 30-day waiting period before taking effect. Planning ahead makes all the difference.
Earthquake Insurance
Like floods, earthquakes are excluded from most standard policies. Homeowners in seismically active regions, such as California or parts of the Midwest, often add earthquake insurance for financial security. This coverage applies to damage resulting directly from ground movement, including cracks in the foundation, collapsed walls, or structural distortion. Separate personal property and loss-of-use clauses can also cover temporary living expenses while repairs take place.
Premiums for earthquake insurance can vary widely, often reflecting the geology of the region and your home’s construction style. Brick and stone homes, while beautiful, tend to cost more to cover since they’re more vulnerable to tremors than flexible wood-frame designs.
If you live near a fault line or in a historically active zone, buying this coverage can turn a potential disaster into an inconvenience instead of a financial ruin.
Umbrella Insurance: The Add-On that Protects Everything Else
While not technically a home insurance type, an umbrella insurance policy is an add-on that deserves attention. It extends your liability coverage across multiple assets, including your home, car, or rental property.
Imagine your dog bites a delivery person or a guest trips and breaks an ankle during a party. If the medical bills and legal costs exceed your regular home policy limits, the umbrella plan covers the excess. Homeowners with high net worth, frequent guests, or multiple properties often find this extra layer invaluable. Umbrella policies are surprisingly affordable given the scope of protection they offer.
RetireMax: Trusted Illinois Home Insurance
Your home may represent years of savings, cherished memories, and personal comfort. Having the right insurance means you can focus on living, not worrying about what one storm or accident might take away.
At RetireMax Insurance, friendly faces and first-name service are more than a tagline; they’re the daily rhythm of our family-run agency rooted in Orland Park, IL, for over three decades. Every conversation starts with listening, then crafting options that fit real lives across Illinois, Indiana, Arizona, and Wisconsin.
As an independent insurance agency, our team compares multiple carriers to match coverage with goals, budgets, and timelines without cookie-cutter plans or pressure.
From the first quote to annual reviews, our agents stay accessible, responsive, and committed to long-term value and clear guidance at every step.
Ready to explore home, auto, life, health, Medicare, or business protection with a neighborly touch and decades of know-how? Contact us today.